M S KUMAR Vs. OFFICIAL ASSIGNEE OF BOMBAY

JUDGEMENT

(1.) THIS is an appeal against a judgment of Coyajee J. by which he granted relief to the Official Assignee on a notice of motion taken out toy him. It appears that one Daulatram gave notice of suspension of payment on 2-8-1951. On 9-8-1951, the creditors presented a petition for adjudication and Daulatram was adjudicated insolvent on 21-8-1951, and the Official Assignee is the assignee of his effects. Now, prior to the petition and prior to the notice of suspension given by Daulatram, an agreement was entered into on 17-5-1951, between the insolvent and the appellants Messrs. M. S: Kumar and Co. By this agreement the insolvent gave on lease -- to use the language of the agreement -- certain machinery for dyeing, bleaching and printing to the appellants on a monthly tenancy commencing from 1-7-1951, and the lessees agreed to pay Rs. 500 per month as rent. By this agreement the lessor agreed not to demand possession of the property so long as the lessees carried out the conditions of the agreement. Pursuant to this agreement the appellants went into possession and used the machinery and on 30-8-1951, the Official Assignee gave a notice to the appellants to hand over this machinery to him as representing the insolvent. He gave them a month's time and took out the notice of motion on 26-9-1951, on which Coyajee J. has made the order. By this notice of motion he claimed a declaration that the agreement dated 17-5-1951, was void and no interest in the property passed to the appellants, and also for an order that the appellants should hand over possession of the machinery etc. to the Official Assignee.

(2.) THE case of the Official Assignee is based upon Section 51, Presidency Towns Insolvency Act, read with Section 9 (b ). Section 51 deals with relation back and the doctrine embodied in that section is that in certain cases the title of the Official Assignee arises prior to the actual order of adjudication, and in this particular case the case falls under Sub-section (b) which provides that if the insolvent is proved to have committed more acts of insolvency than one, and, if the time of the first of the acts of insolvency is proved to have been committed by the insolvent within three months next preceding the date of the presentation of the insolvency petition, then the title of the Official Assignee relates back to the first of the acts of insolvency. In this particular case what is urged by the Official Assignee is that although the order of adjudication was made on the act of insolvency committed on 2-8-1951, the transfer made by the insolvent on 17-5-1951, also constituted an act of insolvency, and as that act was committed within three months of the presentation of the petition, that was the available act to the Official Assignee and his title related back to 17-5-1951. If his title related back to 17-5-1951, then the transfer made by the insolvent on that day was void against the Official Assignee and the goods covered by that transfer in the eye of the insolvency law belonged to the Official Assignee and were available for payment of debts of the insolvent.

(3.) THE first contention urged by Mr. Banaji is that the transaction of 17-5-1951, does not constitute a transfer of the insolvent's property or any part thereof. The learned Judge has taken the view that not only does it constitute a transfer, but it is with intent to defeat or delay the creditors of the insolvent, and Mr. Banaji has not advanced any argument before us that if in fact this transaction constitutes a transfer within the meaning of Section 9 (b) it was not with the necessary intent required by that Sub-section. Indeed, the facts are so eloquent that it is impossible to contend that any other intent was present except the one referred to in Section 9 (b ). It may be pointed out that the appellants' firm consists of the son of the insolvent, a son-in-law of the insolvent, and two outsiders who were at some time or other in the employ of the insolvent. Mr. Banaji has urged that the agreement of 17-5-1951, is a hire agreement, that the appellants are the hirers and as hirers they have no interest conveyed to them in the property of the insolvent and the insolvent continues to be the owner of the property. Therefore, there is no transfer within the meaning of Section 9 (b)_ Now, "transfer of property" has been denned by Section 2 and it includes a transfer of any interest in property. Therefore, if by this document the insolvent has transferred any interest in his property to the appellants, he would come within the mischief of Section 6 (b ). What has been strongly emphasised by Mr. Banaji is that notwithstanding this transaction, notwithstanding the execution of this document, the insolvent continues to remain the owner and therefore there is no conveyance of any property in favour of the appellants. Ownership is a bundle of rights and some of the most important rights which an owner enjoys is the right to be in possession of the property he owns, the right to use the property as he likes and to make such profit out of the property as he wants. Once the appellants went into possession of the property in question, the insolvent had no right to possession of that property. Although the right of the appellants to be in possession was not as owners, they were in juridical possession and they had a right to that juridical possession so long as they paid the rent stipulated under the agreement. The insolvent could not disturb the possession of the appellants and could not deprive the appellants of that pos-session. Equally; so long as the agreement subsisted, although the insolvent might continue to be the owner, he had no right to make any use of the property which was in possession of the appellants, nor to deal with that property. Therefore, with regard to certain important indicia of ownership the appellants had an interest in the property and had rights in the property. In our opinion, it is entirely an erroneous contention to put forward that under Section 9 (b) a transfer is constituted only when the insolvent ceases to be the owner of the property. If that contention were to be accepted, then a mortgage or a lease created by the insolvent would not come within the ambit of Section 9 (b) because both in the case of a lease and in the case of a mortgage the lessor or the mortgagor continues to remain the owner of the property and he only transfers certain rights and interests in the property to the lessee or the mortgagee. What Section 9 (b) requires is that some interest in the property must be transferred by the insolvent. That interest may not be large enough to constitute all the rights of ownership, that interest may be less than the totality of rights which constitute ownership, but so long as the insolvent deprives himself of certain rights or interests in his own property and transfers those rights and interests to someone else, the transaction constitutes a transfer which falls within Section 9. In our opinion, therefore, this particular transaction was a transaction constituting a transfer by the insolvent of interest in his property to the appellants.